This article was published on April 14th in Value Line’s Option Survey.
Helped by a 7% increase, year to year, of its shipments of iPhones in the fiscal 2014 first (December) quarter, Apple (AAPL) appears set to return to an earnings-growth mode. Indeed, the next generation iPhone 6, expected to be launched shortly with a larger display, would likely boost share earnings in the second half of fiscal 2014 about 15% above the prior year’s level. All in all, we currently see this year’s share net rebounding 9%, to $43.25, and a more robust 18% in fiscal 2015 (to $51.25). Based on fiscal 2014’s estimated tally, the P/E ratio of 12.0 seems quite reasonable, especially when factoring in cash assets at December 28th equivalent to almost $46.00 a share. Too, the current annualized dividend yield is a decent 2.3%, and the payout, which was raised 15% in late April, 2013, may well be lifted again this month.
Apple stock’s share price has traded in a range of about $500 and $550 since January, and is modestly below the 50-day moving average (now at about $530). Moreover, solid share-price support surfaced at the lower end of that range. Accordingly, we view the potential sale of a cash-covered put with a $490 strike price expiring on May 17th, with an annualized yield of about 15% as worthy of consideration following a thorough review of Value Line’s recent reports on Apple. Note, too that the data in the Value Line Option Survey screen suggests that the option is modestly overvalued, a favorable consideration in this case.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.